Investors Appear Satisfied With Jiangsu Nata Opto-electronic Material Co., Ltd.'s (SZSE:300346) Prospects As Shares Rocket 30%

The Jiangsu Nata Opto-electronic Material Co., Ltd. (SZSE:300346) share price has done very well over the last month, posting an excellent gain of 30%. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 5.8% in the last twelve months.

Since its price has surged higher, when almost half of the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2x, you may consider Jiangsu Nata Opto-electronic Material as a stock not worth researching with its 11x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Jiangsu Nata Opto-electronic Material

How Has Jiangsu Nata Opto-electronic Material Performed Recently?

Jiangsu Nata Opto-electronic Material certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Jiangsu Nata Opto-electronic Material's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Jiangsu Nata Opto-electronic Material?

Jiangsu Nata Opto-electronic Material's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a decent 4.4% gain to the company's revenues. Pleasingly, revenue has also lifted 201% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 22% each year as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader industry.

In light of this, it's understandable that Jiangsu Nata Opto-electronic Material's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Jiangsu Nata Opto-electronic Material's P/S?

The strong share price surge has lead to Jiangsu Nata Opto-electronic Material's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Jiangsu Nata Opto-electronic Material shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Jiangsu Nata Opto-electronic Material that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.